Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF ACCOUNTANCY AND FINANCE
Sta. Mesa, Manila

It has been a tough academic year for you. You have been through a lot of inevitable challenges, which I believe have helped you to
become a stronger PUP accountancy student today than you were yesterday. As you are becoming near to the day of taking your
first Special Qualifying Departmental Examination, may I take this opportunity to remind you that you are loved and God has always
a lot of great plans for you. I believe that you are experiencing difficult things because you are just being molded to become the best
that you can be. Whatever result you may get, I pray that you will continue to strive for your goal and you will never stop believing on
yourself and on the things you can do.

All of your efforts and hardships will surely be paid off. Remember that you are created to become victorious because you are more
than a conqueror through Jesus who always got you.

Keep on pushing your limits! May the good Lord continuously bless and keep you, future CPA!

Romans 8:37 "No, in all these things we are more than conquerors through him who loved us."

Special Note: Questions on this reviewer are from different knowledgeable lecturers. Credit is theirs, not mine.

-Shania Bayhon Buenaventura-

REVIEWER

THEORIES – Multiple Choices

1. Which of the following are correct statements relating to partnership?

I. A partnership is created by operation of law.
II. A partnership is created by mere agreement of partners.
III. A partnership may be constituted in any form.
IV. A partnership is dissolved by the death of a partner.
a. II, III, and IV c. I, II, III, and IV
b. I, III, and IV d. I, II, and IV
2. The partnership agreement is contained in the Article of Co-Partnership, an expressed contract among partners. Such
agreement includes all the following, except:
a. the rights and duties of the partners
b. the allocation of profits between partners
c. the rights and duties of the partners in the event of partnership liquidation
d. a limitation on partners’ liability to creditors
3. A partner’s investment in a partnership may include which of the following?
a. cash c. patents
b. machineries d. any of the above

4. A partner who is liable for partnership’s debts even beyond his contribution to the partnership is called a
a. capitalist partner c. limited partner
b. managing partner d. general partner

5. The formal written partnership agreement registered with the Securities and Exchange Commission (SEC) is called
a. By-laws c. Articles of Co-partnership
b. Articles of Incorporation d. Contract of Mutual Agency

6. This is a characteristic of a partnership which makes a partner’s act binding for all the other partners, except in cases when the
act is beyond the scope of partnership operations.
 a. Onerous c. Principal
b. Bilateral d. Mutual Agency
7. Assuming that the amount is reliably determinable, at what amount should the non-cash assets contribution of a partner be
credited to his capital account?
a. Historical cost c. Assessed value
b. Carrying value in the old books d. Fair value

8. A partnership where all of the partners are liable for partnership debts even beyond their capital contribution is called
a. particular partnership c. universal partnership
b. general partnership d. limited partnership

9. One who is not a partner but represent himself as one is commonly called
a. partner by estoppel c. co-owner
b. dormant partner d. secret partner

10. The assets contributed by partners in a partnership become the common property of all partners. This kind of partnership is
characterized by
a. co-ownership of profit c. co-ownership of all present property
b. co-ownership of all present profit d. co-ownership of property

11. The closing entries of a partnership includes an entry to

a. close the profit or losses and dividends to the retained earnings account
b. eliminate the capital accounts and record the distribution of assets to partners when the partnership is terminated
or liquidated
c. record the distribution of cash to partners
d. transfer the resulting balance of the income summary to drawing accounts
12. Lougina is an industrial partner of Abayan Partnership. Aside from her services, she also contributed capital to the partnership.
There is no agreement between Lougina and her other partners as to the distribution of profits and losses. The share of Lougina
in the profit will be:
a. determined by her remaining partners c. deemed just and equitable under circumstances
b. pro-rated to his capital contribution d. equal to the share of other partners

13. Which of the following best describes the nature of salary and interest allowances in a partnership profit and loss sharing
agreement?
a. The personal amount of taxable income of each partner
b. The determination of the reasonable amount of monthly withdrawals by each partner
c. The division of profits that considers the services rendered and capital invested by partners
d. Expenses of the business that should be deducted from revenues to determine profit

14. If the partnership agreement does not specify how profit is to be allocated, profits or losses should be allocated to partners
a. equally.
b. in proportion to the average capital invested during the period.
c. based on the ratio of all the partners’ capital contribution.
d. equitably, so that partners will be well-compensated for their time and effort.
15. If profits were to be allocated based on capital balances, which of the following capital balances is considered most equitable?
a. Ending capital c. Beginning Capital
b. Average Capital d. Original Capital

16. If the partnership profit is not enough for the salary and interest allowances of partners during its profit sharing, then
a. salary allowance is not provided to partners anymore.
b. interest allowance is not provided to partners anymore
c. both salary and interest allowances are not given to partners anymore.
d. any remainder after the distribution of allowances is taken as a negative amount and divided in an agreed ratio.

17. Which of the following is not a component of the formula used to divide profits among partners?
a. Interest on loans payable to partners c. Salaries to managing partners
b. Remainder in an agreed ratio d. Interest on average capital investments
18. Which of the following are considered legitimate expenses of a partnership?
I. interest paid to partners based on the amount of their invested capital
 II. depreciation on assets contributed to the partnership by the partners
III. salaries of the managers hired to manage and supervise the business
IV. supplies consumed in the partners’ offices
a. I, III, and IV c. II, III, and IV
b. I, II, and III d. I, II, III and IV

19. Kristofferson, Everette, and Noel are partners of KEN Partnership. Their contributions are as follows: Kristofferson, P2,400,000;
Everette, P1,600,000; and Noel, his skills, time, and services. The partners did not agree on how to divide profits or losses. If
there is a loss of P400,000, how should the loss be divided among the partners?
a. Kristofferson, P133,333; Everette, P133,333; Noel, P133,333.
b. Kristofferson, P200,000; Everette, P200,000; Noel, nothing.
c. Kristofferson, P240,000; Everette, P100,000; Noel, P60,000.
d. Kristofferson, P240,000; Everette, P160,000; Noel, nothing.

20. Nell, Ashley, and Shane are partners of NAS Company, where Nell only contributes his time and services. During 2018, the
company realized a profit of P240,000. While on 2019, NAS sustained a loss of P120,000. It was agreed that Nell will get one-
third of the profit but will not have any share on losses. How much was Nell’s share in profit and loss during 2018 and 2019,
respectively, of NAS Company’s operations?
a. P80,000 share on profit; P40,000 share on loss c. No share on profit P80,000 share on loss
b. P80,000 share on profit; no share on loss d. P40,000 share on profit; P80,000 share on loss
21. Which component of shareholders’ equity consists primarily of amounts invested by shareholders?
a. accumulated profits c. paid-in capital
b. accumulated other comprehensive income d. revaluation surplus
22. Which of the following statement is not correct with regards to corporation?
a. The death of an incorporator does not affect the existence of the corporation.
b. A corporation has a legal personality separate from its owners.
c. The shareholders’ liability for corporate debts is unlimited to what they have contributed to the corporation.
d. A corporation may not be created by mere agreement of five or more persons.

23. Which of the following is not a basic right of a shareholder?

a. The right to appoint a senior manager for the daily operations of the corporation.
b. The right to receive corporate assets in the event of corporate liquidation.
c. The right to elect the members of the board of directors.
d. The right to subscribe additional issues of share capital.

24. Assuming all the following are reliably determinable, the basis to measure the non-cash asset received by a corporation in
exchange for shares issued is the
a. par value of the share issued. c. fair value of the shares issued.
b. fair value of the non-cash asset received. d. book value of the non-cash asset contributed.

25. Under the guidelines of Philippine Interpretation Committee, transaction costs, such as documentary stamp tax, underwriting
costs, and SEC registration fees, incurred by the corporation relating to the issuance of share capital are most appropriately
a. taken to profit and loss section. c. charged against the related share premium.
b. written off directly against the share capital. d. charged to the appropriate expense account.

26. Which of the following is not an advantage of organizing corporate forms of business?
a. The liability of the shareholders is limited only to their contribution to the corporation.
b. A corporation’s existence is not affected by the transfer of ownership shares.
c. Corporations have strong credit availability because of its continuous existence.
d. Corporations are subject to income tax rates higher than those for partnerships.
27. The basic source of retained earnings among the following is
a. gains from sales of fixed assets. c. profit from operations.
b. revaluation of non-current operating assets d. share premium.

28. In case there are no bidders for delinquent shares,

 a. the shares will be reissued to the original subscriber.
b. the corporation will issue a proportionate number of shares to the defaulting subscriber.
c. the subscription will be cancelled and the amount previously collected will be returned to the original subscriber.
d. the shares will be issued in the name of the corporation as treasury shares.

29. Which of the following transactions is not recorded in the same manner under both of the journal entry method and memorandum
entry method of recording transactions?
a. sale of share capital for cash c. receipt of share capital subscription
b. issuance of capital previously subscribed d. receipt of authorization to issue share capital

30. Which is not typically a right of an ordinary shareholder?

a. Right to issue additional of share capital c. Right to subscribe bonds issued by corporation
b. Right to attend shareholders’ meetings d. Right to transfer his shares

31. When subscription is received at a price in excess of the par value of share capital,
a. share capital account is credited equal to the subscription price.
b. additional paid-in capital is recognized at the date of subscription.
c. additional paid-in capital is recognized at the date of the full payment of the subscription price.
d. no entry is made at the date of subscription.
32. What is the most common preference given to preference shareholders?
a. Assurance on the return of the full contribution in the event of corporate liquidation
b. Assurance on the receipt of dividends higher than those given to ordinary shareholders
c. Assurance on the receipt of dividends, usually at a stated rate, before any dividend is distributed to ordinary
shareholders
d. Assurance on the receipt of dividends, usually at a stated rate, after any dividend is distributed to ordinary
shareholders
33. Holders on non-cumulative preference shares
a. lose their claims on dividends not declared in previous years.
b. generally have voting rights.
c. may become corporate creditors when the corporation fails to declare dividends in a year
d. may receive dividends in arrears.
34. Which statement is incorrect regarding the appropriation of retained earnings?
a. Appropriation may be resulted from contractual provisions.
b. Appropriation does not affect to the total balance of retained earnings.
c. Appropriation always indicates that funds are being set aside for specific purposes.
d. Appropriation may be made from discretionary actions of the board of directors.
35. Which of the following will result in an increase in the additional paid-in capital?
a. Sale of treasury shares at an amount higher than the acquisition cost
b. Sale of treasury shares at an amount lower than the acquisition cost
c. Purchase of treasury shares at an amount higher than its par value
d. Purchase of treasury shares at an amount lower than its par value
36. Ed Sheeran Corporation declared a 15% bonus issue. The fair value of each share exceeds the par value on the date of
declaration. The bonus issue shall
a. be charged to retained earnings at the fair market value of the shares.
b. be charged to retained earnings at the par value of the shares.
c. be credited to a financial liability account.
d. decrease the total shareholders’ equity balance.
37. Katy Perry, Inc. paid cash dividends to its ordinary shareholders on February 1, 2019. The dividends were declared on December
20, 2018. Therefore,
a. the balance of the retained earnings decreased on February 1, 2019.
b. the total shareholders’ equity balance decreased on February 1, 2019.
c. the balance of retained earnings was not affected on December 20, 2018.
d. the balance of retained earnings was not affected on February 1, 2019.
38. 25% of the recent cash dividends declared by Maroon 5 Company represent liquidating dividends. How would the declaration
of the dividends affect the balance of contributed capital and retained earnings, respectively?
 a. decrease; decrease c. decrease; no effect
b. no effect; decrease d. no effect; no effect

39. The receipt of donated shares from shareholders

a. increases the total shareholders’ equity. c. has no effect on total shareholders’ equity.
b. decreases the total shareholders’ equity. d. has no effect on shares outstanding.
40. Rihanna Corporation failed to declare or pay dividends on its cumulative preference shares for the last two years. These
undeclared and unpaid dividends shall be reported
a. as part of the current liabilities only. c. as a reduction from profit of the current period.
b. as part of the total liabilities. d. in the notes of the financial statements.

THEORIES – True or False

1. The admission of a new partner does not require the consent of all partners.
2. The amount of net assets invested by a new partner into an existing partnership is always equal to the amount credited to
his capital account.
3. Paul Klein, a partner of LANY Partnership, sells an interest to a new partner, Dua Lipa, at an amount that exceeds the
carrying amount of the equity sold. The resulting difference is recognized on the books of LANY Partnership as a gain.
4. Any salary allowances stipulated in the partnership agreement are considered only if profit is sufficient to recover such
allowances.
5. The percentage of ownership interest of the partners is always the same as their profit sharing ratio.
6. In the limited partnership, all the partners are only limited partners who are liable for partnership debts only up to the extent
of their contributions to the partnership.
7. Ellie Goulding, a new partner, enters Fifty Shades Company by purchasing Zayn Malik’s, an old partner, interest. The cash
that Ellie must pay to Zayn shall be equal to her recorded capital balance in the partnership books.
8. When organizing a partnership, the agreement of the partners must always be embodied in a public instrument, known as
the Article of Co-ownership.
9. James Arthur, Cardi B, and Bruno Mars, who is a billionaire, are thinking to form a partnership. James and Cardi may
stipulate on their Articles of Co-partnership that Bruno be exempted from sharing in profits since he is already a billionaire.
10. The partnership agreement should be clear on the treatment of salary allowances when losses are incurred. In an absence
of an agreement to govern this situation, salary allowances will be provided even when operations yield losses.
11. The admission of a new partner by investing cash or other assets in the partnership will increase the total assets and total
shareholders’ equity of the partnership.
12. Creditors other than partners are the first priority in the distribution of partnership assets during liquidation.
13. In a lump-sum liquidation, a capital deficiency resulting from division of loss from asset realization must be eliminated before
making any payment to partners.
14. Any resulting capital deficiency is offset against a loan balance of the same partner, regardless as to whether the different
partner is solvent or insolvent.
15. Any resulting capital deficiency of an insolvent partner is eliminated by charging the capital accounts of the remaining
partners.
16. Preference share gives the holder preference over the holders of ordinary shares with respect to dividend payments.
17. A corporation prepares no entry relating to the dividends declared on the date of record.
18. A bonus issue requires a transfer from retained earnings to contributed capital.
19. Liquidating dividends decrease the total contributed capital of the corporation.
20. An appropriation of retained earnings is necessary for the cost of treasury shares held by the corporation.
21. Shares issued in exchange for services received shall be recorded at the fair value of services received or fair value of the
shares issued, whichever is more reliably determinable.
22. Preference share does not carry a right to vote.
23. Any share premium or additional paid-in capital sold through a subscription is recorded at the date the subscription contract
is signed, rather than when the share capital is issued.
 24. Treasury shares were acquired for cash at more than its par, and then subsequently sold for cash at more than its acquisition
price. The subsequent sale of the treasury shares increases the balance of share premium but has no effect on the share
capital.
25. Declaration of a bonus issue does not increase retained earnings.
26. The declaration of the board of directors of One Direction Corporation of share dividends on March 7, 2019 increases the
total balance of shareholders’ equity.
27. Harry Styles, the accountant of Live While We’re Young, Inc., is in the process of closing the company’s books. He
transferred to the shareholders’ individual drawing accounts the resulting balance of Income Summary account representing
profit. Therefore, Harry appropriately recorded this transaction.
28. The declaration of a bonus issue is recorded in a memorandum entry.
29. 10,000 shares of P20 pat ordinary share capital were initially issued at P25 per share. Subsequently, 2,000 of these shares
were retired at P30 per share. The retirement of the ordinary shares has no effect to the balance of share premium and
accumulated profits.
30. As a general guideline, a bonus issue of less than 20% of the number of share previously held outstanding is considered
as a large bonus issue.

PROBLEMS – Multiple Choices

CASE 1
On January 3, 2019, Maximiana, Merced, and Tranquilino entered into articles of co-partnership for the operation of Bayhon
Computer Shop. Maximiana contributed investment property with assessed value of P1,700,000 subject to mortgage payable of
P500,000 to be assumed by the partnership. Merced contributed computer equipment with cost of P600,000 with accumulated
depreciation of P200,000. The fair market value of the computer equipment is P300,000. On January 4, 2019, the partnership
was able to sell the investment property for P2,000,000.

1. How much cash shall be contributed by Tranquilino if the articles of co-partnership provide that Maximiana will have 60% interest
in the partnership?

a. P700,000 c. P600,000
b. P450,000 d. P350,000

CASE 2
Nene and Totoy started a partnership. Nene contributed a building that he purchased 10 years ago for P100,000. The
accumulated depreciation on the building on the date of formation of the partnership is P25,000, and the fair market value is
P110,000.

2. For what amount will Nene’s capital account be credited on the books of the partnership?
a. P100,000 c. P110,000
b. P250,000 d. P150,000

CASE 3
The Statement of Financial Position as of July 31, 2019 for the business owned by Ronel Jayvee shows the following assets
and liabilities:
Cash P 50,000
Accounts Receivable 134,000
Merchandise Inventory 220,000
Furniture and Fixtures 164,000
Accounts Payable 28,800

It is estimated that 5% of the receivable will be proved uncollectible. The cash balance includes a P1,000 investment shares
classified as fair value through profit and loss recorded at its cost of P8,000. The shares last sold on the market were at P21.50
per share. Merchandise inventory includes obsolete items costing P20,000 that will probably realized only P4,000. Depreciation
 has never been recorded; however, the furniture and fixtures are two years old, have estimated total life of 10 years, and would
cost P240,000 if purchased new. Prepaid items amount to P7,000.

Schenia Rheign is to be admitted as a partner upon investing P200,000 cash and P100,000 merchandise.
3. How much capital is to be credited to Ronel Jayvee upon formation of the partnership?
a. P556,200 c. P665,000
b. P655,800 d. P565,000

CASE 4
Lingling and Malou entered into a partnership on January 1, 2019 and invested the following assets:
Lingling Malou
Cash P 40,000
Merchandise Inventory P 90,000
Land 130,000
Equipment 30,000
Furniture and Fixtures 200,000

The agreement between them provides that profits and losses are to be divided 60% and 40% to Lingling and Malou,
respectively, and that the partnership is to assume the P100,000 mortgage on the land.

4. If Malou is to receive capital credit equal to the full amount of her net assets invested, how much is her capital balance upon
partnership formation?
a. P150,000 c. P200,000
b. P120,000 d. P220,000

CASE 5

Noel admits Lougina as a partner in business. Just before the partnership’s formation, Noel’s books showed the following:

Cash P 2,600 Accounts Payable P 6,200

Accounts Receivable 12,000 Paul, Capital 26,400
Merchandise Inventory 18,000

It was agreed that for establishing Noel’s investment in the firm, the following adjustments shall be reflected:
 Allowance for bad debts of 2% should be set up.
 Merchandise inventory should be valued at P20,200.
 Prepaid expense of P350 and accrued expense of P400 should be recognized.

5. How much cash should Lougina invest to secure a one-third interest in the partnership?
a. P16,155 c. P14,155
b. P15,150 d. P13,150

CASE 6

Priscilla, Maritess, and Eliseo formed a partnership on August 1, 2019 with the following assets contributed by each partner
measured at their fair values.

Priscilla Maritess Eliseo

Cash P 37,500 P 45,000 P112,500
Merchandise Inventory - 13,125 9,375
Machinery and equipment 562,500 105,000 -
Furniture and fixtures 31,875 19,125
Totals P631,875 P182,250 P121,875
 Although Eliseo has contributed the largest amount of cash to the partnership, he did not have the full amount of P112,500
available and was forced to borrow P75,000. The Machinery and equipment contributed by Priscilla has a mortgage of P337,500
and the partnership is to assume responsibility for the loan. The partners agree to equalize their interest. Cash settlement among
the partners is to be made outside the partnership.

6. Using the bonus method, how much should Maritess and Eliseo pay Priscilla, respectively?
a. P16,750; P77,625 c. P17,250; P77,625
b. P16,750; P76,750 d. P17,250; P76,750

CASE 7
Hawen, Ever, and Benok formed the BEH Partnership on August 1, 2019, with the following assets, measured at fair market
values, contributed by each partner.
Hawen Ever Benok
Cash P 324,000 P108,000 P129,600
Accounts Receivable 73,080 - 91,800
Property, Plant, & Equipment (PPE) 1,620,000 340,200 -

A part of Hawen’s cash contribution, P216,000, comes from personal borrowings. Also, the PPE of Hawen and Ever are
mortgaged at the bank for P972,000 and P72,000, respectively. The partnership is to assume responsibility for these PPE.

The partners have agreed to share profits and losses on a 5:2:3 ratio, to Hawen, Ever, and Benok, respectively.

7. What is the capital balance for each partner at the opening of business on August 1, 2019?
a. Hawen, P1,020,080; Ever, P356,800; Benok, P221,400
b. Hawen, P1,045,080; Ever, P376,200; Benok, P221,400
c. Hawen, P1,045,080; Ever, P356,800; Benok, P217,400
d. Hawen, P1,020,080; Ever. P376,200; Benok, P217,400

CASE 8
On July 1, 2019, Shai and Rence formed JASH Partnership, agreeing to share profits and losses in the ratio of 4:6, respectively.
Shai contributed a parcel of land that costs her P25,000. Rence contributed P50,000 cash. The land was sold for P50,000 on
July 1, 2019, four hours after the formation of the partnership.

8. How much should be recorded in Rence capital account upon the formation of JASH Partneship?

a. P10,000 c. P25,000
b. P20,000 d. P50,000

CASE 9
Liza, Ursula, and Viola decided to form LUV Partnership for the practice of accounting profession. Liza and Ursula were
previously operating their respective single proprietorship, while Viola resigned from her employment to join Liza and Ursula.
Liza invested his customers’ list, which was recognized by the partnership as an intangible asset at P400,000 and an accounts
receivable of P1,000,000, considered to be 80% collectible. Ursula invested an equipment costing P1,600,000, with a carrying
value of P720,000. The partners agreed to record the equipment in the books of the partnership at the estimated fair value of
P1,000,000. Viola will invest sufficient cash to give him equity of 20%.

9. How much should is the capital balance of Liza immediately after the formation of the partnership?

a. P1,200,000 c. P1,600,000
b. P1,000,000 d. P1,120,000

10. How much cash should Viola invest to be entitled with a 20% share in equity?

a. P500,000 c. P450,000
b. P550,000 d. P400,000
 CASE 10
Ashley and Shane are both Certified Public Accountant who have been operating their own separate practices as sole
proprietors. They decided to combine the two firms as a partnership on January 3, 2019. The following assets were contributed
by each:

Ashley Shane

Cash P700,000 P 700,000

Trade Receivable 1,575,000 1,330,000

Equipment 245,000 266,000

Fixtures 322,000

The partners agreed to split profits on the basis of gross cash collections from billing generated from clients. During 2019,
Ashley’s clients paid the firm a total of P10,500,000 and Shane’s clients paid P11,375,000. Expenses for the year were
P7,560,000 of which P3,360,000 were attributable to Ashley and the balance to Shane. During the year, Shane withdrew
P5,250,000 cash for personal needs and contributed an additional computer valued at P154,000.

11. What is the capital balance of Shane at December 31, 2019?

a. P4,996,500 c. P4,895,000
b. P4,965,800 d. P5,690,800

CASE 11
On March 1, 2019, Robine Neil and Tom Zubine decide to combine their business and form a partnership. The balance sheets
of Robine Neil and Tom Zubine on March 1, 2019 before adjustments show the following:

Robine Neil Tom Zubine

Cash P 9,000 P 3,750

Accounts Receivable 18,500 13,500

Inventories 30,000 19,500

Furnitures and Fixtures (net) 30,000 9,000

Office Equipment (net) 11,500 2,750

Prepaid Expenses 6,375 3,000

Totals P105,375 P105,375

Accounts Payable P 45,750 P 18,000

Robine Neil, Capital 59,625

Tom Zubine, Capita 33,500

Totals P105,375 P105,375

 They agreed to provide 3% for doubtful accounts of their accounts receivable and found Tom Zubine’s furnitures and fixtures to
be under-depreciated by P900.

12. If each partner’s share in equity is to be equal to the net assets invested, the capital account of Ruben Neil and Tom Zubine,
respectively, would be:
a. P66,750; P32,625 c. P63,075; P33,250
b. P64,750; P32,150 d. P64,070; P32,195

CASE 12
Heaven Bliss developed an interesting idea for marketing sailboats Tenerife Sea. She encouraged Emmanuel Bless in joining
her partnership. Following the information you have collected to their original contribution:

David Bless contributed P30,000 cash, a track of land, and delivery equipment. Heaven Bliss contributed P60,000 cash. After
giving special consideration to the tax bases of the assets contributed, the relative usefulness of the assets to the partnership
versus the problems of finding the buyers for the assets and contributing cash, and other such factors, the partners agreed that
Heaven Bliss’ contribution was equal to 40% to the partnership tangible assets, measured in terms of the fair value of the assets
to the partnership. However, since the marketing idea originated with Heaven Bless, it was agreed that she should receive credit
for 50% of the recorded capital. Recent sales of land similar to that contributed by David Bliss suggest a market value of P40,000.
Likewise, recent sales of delivery equipment similar to that contributed by David Bless suggest P40,000 as the market value of
the equipment. These sales, of course, were not entirely representative of the particular assets contributed by David Bless and
therefore may be a better indicator of their relative values than their absolute values. In reflecting on their venture, the partners
agree that it is a rather risky affair in respect to anticipated profits. Hopefully, however, they will be able to build good customer
relations over the long run and establish a permanent business with an attractive long-run rate of return.

13. Under the most appropriate method, given the circumstances, the entry to record the formation of the partnership must include
a capital credit to Heaven Bliss and David Bless, respectively, at an amount of
a. P100,000; P70,000 c. P90,000; P80,000
b. P102,000; P68,000 d. P92,000;P78,000

CASE 13
The business assets of LA and NY appear below:

LA NY
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000 -
Building - 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total P1,020,916 P1,317,002

Accounts Payable P 178,940 P 243,650

Notes Payable 200,000 345,000
LA, Capital 641,976 -
NY, Capital -0- 728,352
Total P1,020,916 P1,317,002

LA and NY agreed to form LANY Partnership by contributing their respective assets and equities subject to the following
adjustments:
a) Accounts receivable of P20,000 in LA’s books and P35,000 in NY’s are uncollectible.
b) Inventories of P5,500 and P6,700 are worthless in LA’s and NY’s respective books.
c) Other assets of P2,000 and P3,600 in LA’s and NY’s respective books are to be written off.
14. The capital account of partners after the adjustments will be
a. LA, P614,476; NY, P683,052 c. LA, P640,876; NY, P712,345
b. LA, P640,876; NY, P683,050 d. LA, 615,942; NY, P717,894

15. How much will be the total assets of LANY Partnership after its adjustments upon formation?
a. P2,333,918 c. P2,265,118
b. P2,365,218 d. P2,237,918

CASE 14
PSYCHO Company has the following accounting amounts at the end of 2019:

Sales P70,000 Salary to partners P13,000

Cost of Goods Sold 40,000 Interest paid to banks 2,000
Operating expenses 10,000 Partners’ withdrawals 8,000

16. PYSCHO Company’s partnership net income (loss) at the end of 2019 is
a. P5,000 c. P18,000
b. P20,000 d. (P3,000)
CASE 15
A partnership begins its first year with the following capital balances:
Genesis, Capital P60,000
Samuel, Capital 80,000
Ezra, Capital 100,000
 The articles of partnership stipulate that profits and losses be assigned in the following manner:
 Each partner is allocated interest equal to 10% of the beginning capital balance.
 Samuel’s allocated compensation of P20,000 per year.
 Any remaining profits and losses on a 3:3:4 basis, respectively.
 Each partner is allowed to withdraw up to P5,000 cash per year.

17. Assuming that the net income is P50,000 and that each partner withdraws the maximum amount allowed, what is the balance
in Ezra’s Capital at the end of the year?

a. P105,000 c. P106,500
b. P107,400 d. P112,400

CASE 16
Jonah, Micah, and Nahum are partners in an accounting firm. Their capital account balances at year-end were Jonah, P90,000;
Micah, P110,000; and Nahum, P50,000. They share profits and losses on a 4:4:2, after the following special terms:
 Nahum is to receive bonus of 10% of net income after the bonus.
 Interest of 10% shall be paid on that portion of a partner’s capital in excess of P100,000.
 Salaries of P10,000 and P12,000 shall be paid to partners Jonah and Nahum, respectively.

18. Assume a net income of P44,000 for the year, the total profit share of Nahum is:
a. P19,400 c. P21,500
b. P18,500 d. P16,400

CASE 17
Charlie Puth is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income
after salary and bonus as a means of allocating profit among partners. Salaries traceable to the other partners are estimated to
be P100,000.

19. What amount of income would necessary so that Charlie Puth would consider the choices to be equal?
a. P265,000 c. P305,000
b. P165,000 d. P290,000
 CASE 18
On January 1, 2019, Timothy, Titus, and Philemon organized Letters from Paul Partnership wherein Timothy contributed
P1,000,000 for 20% interest in the partnership. Titus contributed P3,000,000 for a capital credit of P2,500,000. After closing the
accounting the accounting book, Titus and Philemon made drawings of P300,000 and P100,000, respectively. Their profit and
loss agreement is presented below:
 Quarterly salary of P20,000, P5,000, and P60,000, respectively.
 The remainder will be divided in the ratio of 1:5:4.

On December 31, 2019, the capital balance of Philemon is P1,600,000.

20. What is the net income of the partnership for the year ended December 31, 2019?
a. P240,000 c. P280,000
b. P320,000 d. P250,000

21. What is the capital balance of Titus on December 31, 2019?

a. P2,070,500 c. P2,170,000
b. P2,320,000 d. P2,240,000

CASE 19
The accounts of the partnership of Habakkuk, Zephaniah, and Haggai at the end of its fiscal year on September 30, 2018 are
as follows:

Cash P15,000 Loan from Haggai P 10,000

Other Non-cash Assets 130,000 Habakkuk, Capital (30%) 45,000
Loan to Zephaniah 5,000 Zephaniah, Capital (50%) 30,000
Liabilities 50,000 Haggai, Capital (20%) 15,000

22. If Haggai received P9,000 on the first distribution of cash, the cash realized from the initial sale of assets was:
a. P57,000 c. P63,000
b. P59,000 d. P65,000

CASE 20
Ezekiel, Daniel, and Hosea formed a partnership on January 1, 2019 and had the following initial investment:

Ezekiel P100,000
Daniel 150,000
Hosea 225,000

The partnership agreement states that the profits and losses are to be shared equally by the partners after consideration is made
for the following:

 Salaries allowed to partners: P60,000 for Ezekiel, P48,000 for Daniel, and P36,000 for Hosea.
 Average capital balances during the year shall be allowed 10% interest.

Additional information:

 On June 30, 2019, Ezekiel invested additional P60,000.

 Hosea withdrew P70,000 from the partnership on September 30, 2019.
 Share from the remaining partnership profit was P5,000 for each partner.

23. Interest on average capital balances of partners totalled to:

a. P48,750 c. P46,500
b. P45,250 d. P47,000
24. Partnership’s net profit at the end of December 31, 2019 before salaries, interests, and partners’ share on the remaining profit
was
a. P205,750 c. P203,250
b. P204,000 d. P208,000

CASE 20
James, Peter, and John are partners with average capital balances during 2019 of P472,500; P238,650; and P162,350;
respectively. The partners receive 10% interest on their average capital balances, after deducting salaries of P122,325 to James
and P82,625 to John, and the residual profit or loss is divided equally.

In 2019, the partnership had a net loss of P125,624 before interest and salaries to partners.

25. By what amount should the capital of James and John increase or decrease, respectively?
a. James, P33,057 decrease; John, P42,408 increase
b. James, P30,267 increase; John, P40,448 decrease
c. James, P33,057 increase; John, P42,408 decrease
d. James, P30,267 decrease; John, P40,448 increase

CASE 21
The accounts of the partnership of David, Joseph, and Nehemiah at the end of its fiscal year on November 30, 2019 are as
follows:

Cash P103,750 Loan from Joseph P 20,000

Other Non-cash Assets 707,500 David, Capital (30%) 266,250
Loan to David 15,000 Joseph, Capital (50%) 136,250
Liabilities 262,500 Nehemiah, Capital (20%) 141,250

In the first distribution, Joseph received P50,000.

26. What is the total amount distributed to partners?

a. P328,250 c. P332,750
b. P338,250 d. P336,250

27. How much will David receive in the first distribution?

a. P185,750 c. P182,000
b. P176,500 d. P187,500

CASE 22
Israel Prophets Partnership begins its first year of operations with the following capital balances:

Isaiah, Capital P32,000

Jeremiah, Capital 16,000

According to the partnership agreement, all profits will be distributed as follows:

 Isaiah will be allowed a monthly salary of P3,200 and P1,600 to Jeremiah.

 The partners will be allowed with interest equal to 10% of the capital balances as of the first day of the year.
 Isaiah will be allowed a bonus of 10% of the net income after bonus.
 The remainder will be divided on the basis of the beginning capital for the first year and equally for the second year.
 Each partner is allowed to withdraw up to P1,600 a year.

Assume that the net loss for the first year of operations is P2,400, and with net income of P8,800 in the following year. Assume
further that each partner withdraws the maximum amount from the business each period.
28. What is the balance of Isaiah’s Capital account at the end of second year?
a. P46,000 c. P42,360
b. P44,750 d. P40,030

CASE 23
On January 1, 2019, Matthew and Luke formed a partnership by contributing cash of P405,000 and P270,000, respectively. On
February 1, 2019, Partner Matthew contributed an additional P135,000 cash to the partnership and on August 1, 2019, Partner
Matthew made a permanent withdrawal of P67,500. On May 1, 2019, Partner Luke contributed machinery with a fair market
value of P90,000 and a net book value of P75,000 when contributed. On November 1, 2019, Partner Luke contributed an
additional P45,000 cash to the partnership. Both partners withdrew one-fourth of their salary allowances in 2019.

The partnership reported a net income of P257,400 in 2019 and the profit and loss agreement are as follows:

 Interest at 6% is allowed on average capital balances;

 Salaries of P2,700 per month to each partner;
 Bonus to Matthew of 10% of net income after interest, salaries, and bonus; and
 Balance to be divided in the ratio of 6:4 to Matthew and Luke, respectively.

29. Determine how the net income will be allocated to the partners.

a. Matthew, P153,000; Luke, P102, 600 c. Matthew, P162,000; Luke, P102,600

b. Matthew, P162,000; Luke, P104,400 d. Matthew, P153,000; Luke, P104,400

CASE 24
Backstreet and Boy are partners who share profits and losses in the ratio of 60:40, respectively. Backstreet’s salary is p60,000
and P30,000 for Boy. The partners are also paid interest on their average capital balances. In 2019, Backstreet received P30,000
after deductions of interest and Boy, P12,000. The profit and loss allocation is determined after deductions for the salary and
interest payments.

30. If Boy’s share in the residual income (income after deducting salaries and interest) was P60,000 in 2019, what was the total
partnership income?

a. P192,000 c. P387,000
b. P282,000 d. P345,000

CASE 25
Gab, Jay, and Ken are partners sharing earnings in the ratio of 5:3:2, respectively. As of December 31, 2018, their capital
balance showed P237,500 for Gab, P200,000 for Jay, and P150,000 for Ken. On January 1, 2019, the partnership admitted Vin
as a new partner and according to the partnership agreement, Vin will contribute P200,000 in cash to the partnership and will
also pay P25,000 for 15% of Jay’s share. Vin will share 20% in the earnings while the ratio of the original partners will remain
proportionately the same as before the admission of Vin.

After Vin’s admission, the total capital of the partnership will be P825,000, while Vin’s capital account will be P175,000.

31. The balance of Jay’s capital account after the admission of Vin would be:
a. P197,750 c. P192,500
b. P193,000 d. P195,750

CASE 26
The capital balances for JL is P210,000 and for SB is P140,000. These two partners share profits and losses 60% and 40% for
JL and SB, respectively. AC invests P100,000 in cash in the partnership for a 20% ownership.

The bonus method will be used.

32. What are the capital balances for JL, SB, and AC after this investment is recorded?
a. JL, P206,000; SB, P144,000; AC, P93,000 c. JL, P216,000; SB, P144,000; AC, P90,000
b. JL, P216,000; SB, P124,000; AC, P93,000 d. JL, P206,000; SB, P124,000; AC, P90,000

CASE 27
Rochelle, Mica Angela, and Ma. Clarisse are partners with capital balances on January 2, 2019 of P350,000, P420,000, and
P280,000, respectively. Their loss sharing ratio is 3:5:2. On May 1, 2019, Rochelle retires from the partnership. On the date of
retirement, the partnership net income is P240,000. The partners agreed further to pay Rochelle P382,800 in settlement of her
interest.

33. How much will be the capital of Mica Angela after the retirement of Rochelle?
a. P537,320 c. P540,350
b. P546,350 d. P544,320

CASE 28
Jay Laurence and Shania are partners with capital balances of P200,000 and P100,000, and sharing profits and losses 3:1,
respectively. They agree to admit Jash Lauren as partner. Jash invests P150,000 for a 50% interest in the firm.

Jay Laurence and Shania transfer part of their capital balances to Jash Lauren as a bonus.

34. The capital balances of Jay Laurence, Shania, and Jash Lauren, respectively,
a. Jay Laurence, P143,750; Shania, P81,250; Jash Lauren, P225,000
b. Jay Laurence, P143,750; Shania, P80,550; Jash Lauren, P205,000
c. Jay Laurence, P145,250; Shania, P81,250; Jash Lauren, P205,000
d. Jay Laurence, P145,250; Shania, P80,550; Jash Lauren, P225,000

CASE 29
The following are the capital account balances and profit and loss ratio of the partners in the Batak Kami Company:

Capital P&L Ratio

Camille P120,000 25%
Michael 160,000 50%
Monica 400,000 25%

On January 2, 2019, Josh is admitted to the partnership under the following agreement:

 Josh is to share 1/3 in the profits and losses while the other partners continue to particpate in profits and loss ratio in
their original ratio.
 Josh is to pay Michael, P48,000 for a ¼ interest of the latter’s capital in the partnership net assets and is to invest
P280,000 cash in the partnership.
 The total capital after Josh’s admission is to be P1,040,000 of which, Josh’s capital account is to show P300,000.

35. What are the capital balances of the old partners after Josh’s admission?
a. Camille, P170,000; Michael, P155,000; Monica, P405,000
b. Camille, P155,000; Michael, P170,000; Monica, P465,000
c. Camille, P145,000; Michael, P170,000; Monica, P425,000
d. Camille, P145,000; Michael, P185,000; Monica, P405,000
 CASE 30
Lee, Mark, and JR are partners sharing profits in the ratio of 3:3:2, respectively. On July 31, their capital balances are as follows:
Lee, P1,120,000; Mark, P800,000; and JR, P640,000. They agreed to admit Jeric on the following conditions:
 Jeric is to pay Lee P800,000 for 50% of Lee’s interest.
 Jeric is to invest P640,000 in the partnership.
 Some assets in the partnership are undervalued by P640,000.
 Jeric’s interest will be 25%.

36. What would be the total partnership capital immediately after the admission of Jeric?
a. P3,560,400 c. P3,840,000
b. P3,800,000 d. P3,640,000

37. What would be the capital balance of Lee, immediately after Jeric’s admission?
a. P840,000 c. P920,000
b. P890,000 d. P1,120,000

CASE 31
Presented below is the condensed statement of financial position of Wild Thoughts Partnership owned by DJ, Khaled, and
Rihanna. The partners are sharing profits and losses in the ratio of 6:3:1, respectively.

Cash P 340,000 Liabilities P 320,000

Other Assets 1,660,000 DJ, capital 1,008,000
Khaled, Capital 504,000
_________ Rihanna, Capital 168,000
Total P2,000,000 Total P2,000,000

Rihanna is to receive P128,000 as a cash settlement upon her retirement. All assets and liabilities are fairly valued.

38. How much will be the capital balance of Khaled immediately after the retirement of Rihanna?
a. P519,000 c. P515,000
b. P521,333 d. P517,333

CASE 32
On December 31, 2018, the capital balance of partners Ellaine, Jherico, and Sidge of Secret GC Partnership are P2,000,000,
P5,000,000, and P3,000,000, respectively, with profit and loss agreement ratio of 1:3:6, respectively. On January 1, 2019, Ivana
is admitted to the partnership by acquiring 40% of Sidge’s capital interest and profit interest at a price of P1,500,000.

Secret GC Version 2.0 Partnership reported P1,000,000 net income for the year 2019.

39. What is the capital balance of Ivana on December 31, 2019?

a. P1,440,000 c. P1,240,000
b. P1,400,000 d. P1,360,000

CASE 33
Laurence and Shaneneng are partners in an engineering consulting firm sharing profits and losses 40% and 60%, respectively,
and their capital balances are P110,000 and P150,000, respectively. The recorded net assets of the company are follows:

Book Value Fair Value

Working Capital P240,000 P220,000
Property and Equipment (net) 80,000 108,000
Noncurrent liabilities 60,000 60,000
 In addition to the recorded net assets, Liezl, also an engineer, feels that her business contracts and expertise will add value to
the existing partnership. She has valued these intangibles at P20,000.

40. If Liezl were to acquire a 30% interest in the new partnership, how much additional cash would she have to contribute to the
partnership?
a. P34,000 c. P24,000
b. P22,000 d. P17,000

CASE 34
The partnership of Demi, Sia, and Taylor named NO PROMISES Company decided to liquidate their partnership on May 31,
2019. Before liquidating and sharing of net income, their capital balances are as follows: Demi (30%), P250,000; Sia (30%),
P180,000, and Taylor (40%), P220,000. Net income from January 1 to May 31 is P120,000. Liabilities is amounting to P210,000,
and its total assets includes cash amounting to P70,000.

Unsettled liabilities are P110,000. Demi invested additional cash enough to settle their partnership’s indebtedness. Sia is
personally solvent, Taylor is personally insolvent, and Demi becomes insolvent after investing the cash needed by the
partnership.

41. How much were the partnership’s non-cash assets sold for?
a. P25,000 c. P50,000
b. P30,000 d. P35,000

42. How much cash shall Sia additionally invest in the partnership?
a. P100,000 c. P70,000
b. P87,000 d. P90,000

43. How much Demi will receive as a result of the partnership’s liquidation?
a. P85,000 c. P100,000
b. P90,000 d. P75,000

CASE 35
Capital balance of the partners of 24K Magic Company after exhausting their non-cash assets are as follows:
B R U N O M S
20% 10% 10% 10% 20% 10% 20%
(P54,000) P20,000 (P66,000) (P12,000) P35,000 P10,000 (P40,000)

Partners R, N, O, M are personally solvent.

44. How much cash must partner M contribute to the partnership?

a. P22,000 c. P25,000
b. P12,000 d. P27,000

CASE 36
Jason and Derulo are partners with capital balances of P98,000 and P62,000, respectively. They share profits and losses in the
ratio of 3:2, respectively. The partners decided to liquidate their partnership. The firm’s liabilities amount to P144,000 including
P16,000 owing to Jason and P14,000 to Derulo. After the realization of non-cash assets, the cash on hand amounted to
P150,000.

45. How much was the loss on non-cash assets realization?

a. P176,000 c. P154,000
b. P184,000 d. P136,000
46. How much should Jason and Derulo receive in final settlement of their respective interest?
a. Jason, P21,600; Derulo, P14,600 c. Jason, P21,600; Derulo, P14,400
b. Jason, P22,400; Derulo, P14,400 d. Jason, P22,400; Derulo, P14,600

CASE 37
Adam, Cardi, and Levine are partners with a profit and loss ratio of 5:4:1, respectively. The partnership is to be liquidated. Prior
to its liquidation, the statement of financial position shows the following balances:

Cash P 80,000 Liabilities P 80,000

Other Assets 720,000 Adam, capital 320,000
Cardi, Capital 240,000
Levine, Capital 160,000
After the realization, Cardi received P120,000 as a settlement of her interest.

47. How much is the loss on sale of assets?

a. P250,000 c. P400,000
b. P300,000 d. P350,000

48. How much din Levine receive in the final settlement of his interest?
a. P130,000 c. P170,000
b. P127,000 d. P90,000

49. What amount of the total cash was distributed to the partners?
a. P385,000 c. P400,000
b. P390,000 d. P420,000

CASE 38
The statement of financial position of partners Colossius, Philippi, and Thessa has the following balances before liquidation:

Cash P 20,000 Accounts Payable P 40,000

Other Assets 240,000 Colossius, Capital 62,000
Philippi, Capital 88,000
Thessa, Capital 30,000
Thessa, Loan 40,000
Colossius, Philippi, and Thessa share profits and losses in the ratio of 3:2:5, respectively. The non-cash assets of the partnership
were sold for P160,000.

50. How much cash is available for distribution to the partners in settlement of their capital balances?
a. P110,000 c. P120,000
b. P140,000 d. P150,000

51. How much cash is received by Thessa in full settlement of her total interest in the partnership, including loan?
a. P20,000 c. P30,000
b. P40,000 d. P70,000
 CASE 39
Partners Ed Sheeran, Jason Mraz, and Ne-Yo of Hate That I Love You Partnership share profits and losses in the ratio of 2:2:1,
respectively, decided to liquidate. The condensed statement of financial position immediately prior to the liquidation shows the
following:

Cash P 400,000 Accounts Payable P 560,000

Other Assets 1,600,000 Ed Sheeran, Capital 180,000
After Jason Mraz, Capital 420,000
paying
Ne-Yo, Capital 800,000
the
liabilities Ed Sheeran, Loan 40,000
to the partnership creditors, cash of P830,000 is available for distribution to partners. Any capital deficiency is made good by the
deficient partner, since all three partners are personally solvent.

52. How much was the loss on realization?

a. P635,000 c. P580,000
b. P540,000 d. P610,000

53. How much cash would Jason Mraz receive in the final settlement of his interest?
a. P176,000 c. P136,000
b. P216,000 d. P226,000

54. How much cash would Ne-Yo receive in the final settlement of his interest?
a. P678,000 c. P728,000
b. P630,000 d. P710,000

CASE 40
The partnership of So Sick Enterprises ended its operations and is now in the process of liquidation. All assets except some
pieces of equipment have been sold. Its records have the following balances:

Cash P 216,000 Liabilities P 292,800

Equipment, net 883,200 Love, Capital 345,600
Song, Capital 268,800
Tears, Capital 192,000
So Sic Enterprises eventually sold the equipment at 30% of its carrying value.

55. How much should Love receive in the final settlement of her equity?
a. P107,957 c. P87,957
b. P79,757 d. P82,757

56. How much should Song receive if a P48,000 loan payable to him is included in the partnership’s liabilities?
a. P120,581 c. P92,781
b. P101,581 d. P112,781

CASE 41
A balance sheet for the partnership of Danny, Lorna, and Ma-Ann who share profits in the ratio of 2:1:1, shows the following
balances just before the liquidation:

Cash P 48,000
Other Assets 238,000
Liabilities 80,000
Danny, Capital 88,000
Lorna, Capital 62,000
 Ma-Ann, Capital 56,000

On the first installment of liquidation, certain assets are sold for P128,000. Liquidation expenses of P4,000 are paid and additional
liquidation expenses are anticipated. Liabilities are paid amounting to P21,600 and sufficient cash is retained to insure the
payment to creditors before making payment to partners.

On the first payment to partners, Danny receives P25,000.

57. What is the total cash payment to partners in the first installment?
a. P65,000 c. P60,000
b. P75,000 d. P80,000

CASE 42
The following condensed balance sheet is prepared for Ma. Delia and Jonald, who share profits and losses in the ratio of 60:40,
respectively:

Other Assets P405,000 Accounts Payable P108,000

Ma. Delia, Loan 18,000 Ma. Delia, Capital 175,500
Jonald, Capital 139,500
Total P423,000 Total P423,000

The partners have decided to liquidate the partnership.

58. If the other assets are sold for P346,500, what amount of the available cash should be distributed to Ma. Delia?
a. P106,000 c. P122,400
b. P118,400 d. P112,000

CASE 43
Partners Luzviminda, Jeffrey, Noel, and Melinda share profits 50%, 30%, 10%, and 10% respectively. Accounts maintained with
partners just prior to liquidation were as follows:

Advances (Dr. Balances) Loans (Cr. Balances) Capitals (Cr. Balances)

Luzviminda P 5,000 P40,000
Jeffrey 10,000 30,000
Noel P4,500 15,000
Melinda 2,500 25,000

At this point, cash of P18,000 is available for distribution to the partners.

59. How much of the P18,000 cash should be distributed to each partner?
a. Luzviminda, P-0-; Jeffrey, P-0-; Noel, P2,450; Melinda, P-0-
b. Luzviminda, P1,650; Jeffrey, P5,625; Noel, P-0-; Melinda, P11,375
c. Luzviminda, P1,250; Jeffrey, P-0-; Noel, P2,450; Melinda, P-0-
d. Luzviminda, P-0-; Jeffrey, P6,625; Noel, P-0-; Melinda, P11,375

CASE 44
Partners Jonathan, Ryan, and Christian share profits and losses in the ratio of 5:3:2. At the end of a very unprofitable year, they
decided to liquidate the firm. The partner’s capital account balances at this time are as follows:
Jonathan P616,000

Ryan 697,200

Christian 420,000
The liabilities accumulate to P840,000, including a loan of P280,000 from Jonathan. The cash balance is P168,000. All the
partners are personally solvent. The partners plan to sell the assets in installment.
60. If Ryan received P100,800 from the first distribution of cash, how much did Christian received at that time?
a. P18,400 c. P20,000
b. P22,400 d. P24,0000

CASE 45
The following accounts are found in the trial balance of Rockabye Trading Corporation at December 31, 2019:

Authorized Ordinary Shares, P50 par P2,000,000

Subscription Receivable – collectible on January 31, 2020 200,000
Unissued ordinary shares 800,000
Subscribed ordinary shares 400,000
Share premium - ordinary 300,000

61. What is the total number of shares issued?

62. What is the total number of shares available for subscription?

CASE 46
The shareholders’ equity section of Trolls Corporation at the end of 2018 and 2019 are as follows:
2019 2018

12% Preference shares, P100 par P1,000,000 P 600,000

Ordinary shares, P20 par 2,000,000 1,800,000
Share premium - ordinary 160,000
Share premium - preference 800,000 400,000

63. What is the total number of ordinary shares issued at December 31, 2019?

64. How many preference shares were used during 2019?

65. What is the average issue price per share of the preference shares issued in 2019?

66. How many ordinary shares were used in 2019?

67. What is the average issue price per share of the ordinary shares issued in 2019?

CASE 47
On July 1, 2019, Justin Bieber Company issued 1,000 P10 par ordinary shares and 2,000 P10 preference shares for a lump
sum price of P45,000. At this date, Justin’s ordinary and preference shares were selling at P18 and P14 per share, respectively.

68. What is the amount credited to Share premium - Ordinary?

69. What is the amount credited to Share premium - Preference?

CASE 48
DJ Snake Enterprises was organized on January 1, 2019. It was authorized by the Securities and Exchange Commission (SEC)
to issue share capital of P5,000,000, divided into 50,000 shares of P100 par value ordinary share capital. The incorporators
immediately subscribed 12,500 shares at par.

70. How much bus be paid by the incorporators upon subscription to meet the requirements of SEC?
 CASE 49
The Chainsmokers, Inc. prepared the following journal entry on June 30, 2019:

Cash 140,000
Ordinary Share Capital 130,000
Share Premium – ordinary 10,000

Issued ordinary shares at P140 per share.

71. How many shares were issued and what is its par value?

CASE 50
On June 1, 2019, Selena Gomez Company issued 8,000 shares of its P100 par ordinary share capital to Hannah Montana for a
tract of land. The shares were traded in the stock exchange at 180 per share. On Hannah’s last property tax bill, the land had
an assessed value of P1,000,000.

72. How much will the additional paid-capital of Selena Gomez Company be increased as a result of the aforementioned issuance
of shares?

CASE 51
Fifth Harmony, Inc. was authorized to issue 10,000 preference shares of P200 par value and 100,000 ordinary shares of P20
par value. Subscription for 4,000 preference shares was received at P225 per share with a downpayment of 25%. The balance
is payable after 60 days.

73. What is the amount of Share premium – Preference recognized by Fifth Harmony, Inc. upon the receipt of the preference share
subscription?

CASE 52
Anne Marie Company was authorized to issue 10,000 preference shares of P100 par value and 100,000 ordinary shares of P10
par value. Subscription for 40,000 ordinary shares was received at P225 per share with a downpayment of 25%. The balance is
payable after 2 months.

74. What is the correct entry to record the subscription?

75. What is the entry if the subscriber has defaulted to pay the amount after 2 months?

CASE 53
Don’t Let Me Down Company reported the following amounts in the shareholders’ equity section of its December 31, 2018
statement of financial position:

Preference share capital, 10%, P10 par (100,000 shares authorized, 20,000 shares issued) P200,000
Ordinary share capital, P5 par (50,000 shares authorized, 10,000 shares issued) 50,000
Share Premium 96,000
Retained Earnings 600,000
Total P946,000
 The following transactions occurred during 2019:
1) Paid the annual 2018 P1 per share dividend on preference share and P0.50 per share dividend on ordinary shares.
These dividends have been declared on December 31, 2018.
2) Purchased 2,000 shares of its own outstanding ordinary shares for P20 per share.
3) Reissued 700 treasury shares for equipment valuing P25,000.
4) Issued 5,000 preference shares at P15 per share.
5) Declared a 10% stock dividend on the outstanding ordinary shares when the shares were selling for P12 per share.
6) Issued the stock dividend.
7) Declared the annual 2019 P1 per share dividend on preference shares and the P0.50 per share dividend on ordinary
shares. These dividends are payable on 2020.
8) Appropriated retained earnings for plant expansion, P300,000/
9) Appropriated retained earnings for treasury shares.
10) The liquidation value is P11.
11) The net income for 2019 was P470,000.

Based on the given data, determine the correct balances for each of the following accounts on December 31, 2019:

76. Preference share capital

77. Ordinary share capital

78. Combined amount of Share premium

79. Treasury shares

80. Retained earnings

-end of reviewer-
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